Paul Bonnifield: Stimulus falls short

Maybe I'm missing something or don't understand what I should, but I believe that the economic stimulus proposal offered by President Bush and endorsed by many in Congress has no substance.

We are told action is urgent and must be immediate, but payments don't start until May. By May, the economic downturn will have corrected itself or be much worse. Either way, the stimulus package is of little value.

In May, those taxpayers who file early will begin receiving their tax refund checks. The refund checks are, on average, about the same amount as the stimulus package. The amount of money in the stimulus plan and the amount paid in normal tax returns is about the same. The stimulus package doesn't do anything that would not happen anyway.

How is the stimulus package to be paid for - higher taxes, more debt, cutting budget? I've not heard anyone tell how to pay for the plan. I suspect that the plan will be paid for by the normal tax returns. The economic package is nothing but political noise, deception, and dishonesty.

Comments

Does anyone else see the disconnect here? For many years the only thing that has kept our economy healthy is that "the average American" has not handled their personal finances the way that our government has. Recent indications are that economists were right in 2006 when they asserted that a negative savings rate (-.5%) cannot go on forever.

Before it is pointed out that the negative savings rate excludes non-wage income such as capital gains (which is an accurate statement) I would like to offer that in 2003 just over 57% of all capital gains were received by just over 1% of American households. (http://www.cbpp.org/1-29-06tax2.pdf)

To illustrate our poor savins behavior we can simply look at participation in IRAs and 401(k)s, the last savings vehicle of a vast majority of Americans. In 2006, the savings rate once again decreased to 66% of all Americans. Ok, so this means that 2/3 of American workders are saving through their retirement savings program... not bad right? The savings rate by itself is not an indicator of the overall health of our saving behavior. Let's loook at what we have set aside in our retirement savings (our largest savings pool). Of those 55 and over (who have preached for years about retiring early, enjoying the good life, etc.) there is just over 50% of the population with less than $150,000 in savings. Given that Social Security was always designed to be a supplement to other pensions (which have now faded into the sunset for most of us) and not as a primary vehicle how long do we expect the savings to last? (http://www.ebri.org/pdf/briefspdf/EBRI_IB_04a-20075.pdf)

It is time for us to temper our consumer driven society with savings to return to a healthy economy; not "move the pea" by taking funds from existing Governmental entitlements(which cost us all too much and have little effect anyway) and passing them on to each American so that they can further perpetuate the situation we have all (I use this term loosely as my father taught me what it means to be financially responsible) put ourselves in.

Give us the tax rebate, but tell us to pay off our credit cards, our vehicle loan or pay toward our homes. Don't tell us to go to Wal-Mart and buy more stuff.

I completely agree with Paul that the stimulus package is of little substance. While I appreciate the idea of an influx of cash into each American's pocket I really have to wonder what it will do to really affect the slow downard spiral of our economy and keep us from a recession.

Before I am accused of being a liberal facist I would also assert that many of the steps taken in 2003 by the current administration are on track and a much more appropriate way of stimulating our economy than an election year eyewash. (http://online.wsj.com/article/SB120223801548244781.html)

Each American (who will receive it) is encouraged to take the money and go out to their local big box store and buy something. How irresponsible is that?

Before my comrades point out that a recent Brookings Institute study does not show any long-term effect of the "collapse" of the sub-prime market (http://www.brookings.edu/papers/2007/10_mortgage_industry_downs.aspx) I would offer that even more recent analysis and behavior on the part of key credit grantors is showing that the effect is being felt on their bottom line and as a result they are tightening standards.

When you look at the actual history of the rebate it will go down in the final analysis as pure comedy. Not political comedy, just human comedy. Probably would have happened, given the scenario, with either party in power.

The silent "quake" happened at the keyboard of a young French trader/hacker who apparently was a far better hacker than he was a trader. He racked up a (disclosed) deficit of 7 BILLION in the accounts of his bank. This was somehow kept from the press for a few days.

The bankers then had some tricky positions to unwind. This they did, and the operation was bloody, taking down, on that Monday, the value of the most prominent European and Asian stock markets big-time.

Over here in the US, (with still no release of any information concerning the French trader's whopper of a financial crime) we figured it was all about us (it's in our DNA). Our powers that be quickly decided that what those markets were doing was obvious: they were voting with thier feet, fleeing the markets because the ever-shadowy THEY had decided that the US was dropping into a recession. Action was needed.

Thank God that our markets were closed for a holiday, they said ,and maybe a Fed governor or two actually gave thanks to MLK for the first and only time. Then they put in a THREE-QUARTER OF A PERCENT RATE CUT.

Thank God the markets were closed, they said at the White House, and got on the TV with a glorious anti-sermon (in an actual sermon money is asked for) and started giving away money.

The irony is, of course that there there may have been no huge sell-off in our stock markets if they had been open. Those positions of the French bank were pretty much foriegn, and any big knee-jerk sell-off over here would have been a great day for smart money to grab a little value.

Then the press announcements of the trading scandal were released. The rebate.... they should just cancel it. But show me a politician with that kind of foolhardy courage. I would vote for him.